Author Topic: Question about TLH  (Read 1303 times)

shanaling

  • 5 O'Clock Shadow
  • *
  • Posts: 34
Question about TLH
« on: August 24, 2015, 12:11:24 AM »
I saw this from http://www.obliviousinvestor.com/tax-loss-harvesting/

Is this true? Thanks in advance.

Note, however, that you do not need to worry about wash sales if you liquidate all of your shares of a given investment and you do not repurchase substantially identical securities within 30 days.

Example: On January 1, Lucy buys 100 shares of Vanguard Total Stock Market ETF in her brokerage account, at a price of $60 per share. On January 10, Lucy sells her 100 shares for $55 per share, and she does not purchase substantially identical securities in any of her accounts within the next 30 days. Lucy will be able to claim her loss of $5 per share, despite the fact that a purchase occurred within 30 days prior to the sale.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4410
  • Age: 33
  • Location: Seattle, WA
Re: Question about TLH
« Reply #1 on: August 24, 2015, 12:52:59 PM »
Yes, this is true. When you have a wash sale, the disallowed loss is used to increase the cost basis of the "replacement shares" (shares that you bought within 30 days before or after the wash sale). This allows you to realize the benefit of the disallowed loss at a later date when you sell and don't have a wash sale. Suppose you bought some shares a week before you sold all of your shares for a loss. Even if you did consider this to be a wash sale because of the shares you bought a week before, adding the disallowed loss to the basis of the week-old shares would have the same effect as if you ignore the wash sale rule entirely.

shanaling

  • 5 O'Clock Shadow
  • *
  • Posts: 34
Re: Question about TLH
« Reply #2 on: August 24, 2015, 06:26:35 PM »
Thanks for your response.

Let's say I bought the same fund in my brokerage account and my IRA account within the last 30 days. The fund depreciates today. I sell all shares of that fund in my brokerage account today (and hold the fund in my IRA). I don't buy any substantially identical funds in any accounts for the next 31 days. The harvested loss would be allowed, correct?

Sorry I'm very new at this whole harvesting business.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4410
  • Age: 33
  • Location: Seattle, WA
Re: Question about TLH
« Reply #3 on: August 24, 2015, 07:01:46 PM »
IRAs can really complicate wash sales. Purchases in your IRA can be "replacement shares" if purchased within 30 days before or after a sale for a loss in your taxable account, with the added disadvantage that you don't get credit for that loss at a later date. Don't buy any new shares of a fund in your IRA (including automatic dividend reinvestment) within 30 days before or after harvesting losses in that same fund in your taxable account.